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- Fiscal Policy- This is the use of government spending and taxation to influence the economy-Fiscal Policy is used to promote growth and reduce poverty Fiscal policy has a longer lasting effect as well as the effect being greater
- Fiscal V Monetary
- Monetary Policy-This is a set of actions to control a nation's overall money supply to achieve economic growth.-These strategies include revising interest rates and bank reserve requirements.-Usually categorized as contractrionary or expansionary
- Loanable funds can be used as tool towards the equilibrium of the economy as well. Discount Rates:This is the interest rate in which the Fed Reserve lends money to banks. This is a tool since they are able to control the money supply and in turn influence economic activity.
- Loanable Funds
- Loanable Funds Market
- This is the interaction of borrowers and savers in the economy. The borrowers are the demanders of loanable funds and the savers are the suppliers of the loanable funds
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- Impact on AS- The supply of loanable funds represents the behavior of all saver in the economy. The higher interest rate that a saver can earn, the more likely they are to save their money. In turn the supply of loanable funds shows that the quantity of savings available will increase and the interest rate increases.
- Impact on AD- Monetary policy affects interest rates and the available quantity of loanable funds in which turn affects sever components of aggregate demand. Tight or contractionary monetary policy taht leads to high interest rates and reduced amoun of loanable funds with lower the two components of agregate demand
- Impact of Loanable Funds
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